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11 May 2017

NAFTA’s impact on Mexico’s working women

Esmée writes:*

On January 1 1994, the North American Free Trade Agreement was signed by Canada, Mexico, and the United States. It consists of two parts: the North American Agreement on Environmental Cooperation and the North American Agreement on Labor Cooperation. It was aimed at increasing trade between the three countries by creating a trilateral trade bloc. Free trade is a well-known driver of economic growth. However, contrasting empirical evidence exists on NAFTA’s impact on Mexico’s development. Mark Weisbrot, for example, argues that the agreement has tied the country’s economy even closer to the US economy, led to the displacement of many small Mexican corn farmers, and failed at reducing poverty in the country. On the other hand, Steffan argues that NAFTA has triggered a process of democratic transition in Mexico by reducing the power of the presidency and removing authoritarian legacies.

Apart from these more general findings, another, less researched impact of the agreement exists: Its impact on Mexico’s women, through the increased amount of Maquiladoras. These are foreign-owned manufacturing plants that assemble duty-free imported components/materials/equipment for export. The Mexican government initially implemented the Maquiladora program to boost industrial growth in Northern Mexico and slow down labor migration to the US. Sixtypercent of the 1.3 million workers in Mexico’s 4000 Maquiladoras are women [pdf]. They are mostly young and uneducated. They work around 50 to 80 hours a week and earn 56 cents an hour. With the implementation of NAFTA, Maquiladora workers expected a rise in wages, job growth, and improved working conditions. However, not all these promises were realized. As a result of the trade agreement, Mexico became attractive for multinational corporations looking to cut costs, and the amount of foreign-owned maquiladoras doubled.

Comparing current female labor force statistics to the ones prior to the implementation of NAFTA, research indicates that in general, this trade liberalization has improved women’s labor outcomes. According to Aguayo-Tellez et al. [pdf], Mexican women’s relative wages increased by 2.7 percentage points during the period after NAFTA. They also found that there has been a declining share of agricultural employment since NAFTA, and that at the same time female intensive sectors such as clothing and electronics have grown. Additionally, according to the World Bank, Mexico’s female labor participation rate has increased from 34% to 45% from 1990 to 2016.

Now this may seem like a generally positive result. However, Mexico’s pollution regulation, labor rights enforcement, and corruption enforcement have been lax. Human Rights Watch has reported forced pregnancy testing and deteriorated health and safety conditions in the factories, as well as public health problems related to pollution/toxic chemicals exposure, such as miscarriages and fainting spells. Women rights organizations have claimed that all this has contributed to the reinforcement of gender inequality. Unfortunately, Mexico’s institutions are not designed to prevent these negative impacts from happening.

When looking at the alternative path that Mexico might have been on without NAFTA, we can thus conclude that considering job creation and wages, Mexico’s female labor force is probably better off now than it was 25 years ago. However, the trade liberalization has had a neutral or even negative impact on women labor rights, through a lack of efficient institutions in Mexico. Now that US President Donald Trump is arguing for a renegotiation of NAFTA, taking into account women labor rights in Mexico in such a renegotiation would thus be crucial. However, considering Trump does not seem to care a lot about women in general, assuming he will care about Mexican women is probably highly unrealistic.

Bottom line: The NAFTA agreement was designed to increase the economic growth and development of all three involved countries, including Mexico. However, NAFTA has been problematic for Mexico’s female labor force, due to the increased amount of Maquiladoras in the northern part of the country. Despite increased wages and job creation, instead of raising Mexican women’s standard of living, NAFTA has led to greater gender inequality and health problems.
* Please comment on these posts by students in my growth & development economics course. It really helps if you highlight unclear analysis, alternative perspectives, better data, etc.